Saturday, February 23, 2013

CoStar Study Finds Energy Star, LEED Bldgs. Outperform Peers

From: CoStar Group

Demand in Marketplace for Sustainability Creates Higher Occupancy Rates, Stronger Rents and Sale Prices in 'Green' Buildings
March 26, 2008
 A new study by CoStar Group has found that sustainable "green" buildings outperform their non-green peer assets in key areas such as occupancy, sale price and rental rates, sometimes by wide margins.

The results indicate a broader demand by property investors and tenants for buildings that have earned either LEED® certification or the Energy Star® label and strengthen the "business case" for green buildings, which proponents have increasingly cast as financially sound investments.

According to the CoStar study, LEED buildings command rent premiums of $11.33 per square foot over their non-LEED peers and have 4.1 percent higher occupancy. Rental rates in Energy Star buildings represent a $2.40 per square foot premium over comparable non-Energy Star buildings and have 3.6 percent higher occupancy.

And, in a trend that could signal greater attention from institutional investors, Energy Star buildings are selling for an average of $61 per square foot more than their peers, while LEED buildings command a remarkable $171 more per square foot.

Andrew Florance, president and CEO of CoStar, called the findings a "strong economic case for developing green buildings" at a recent seminar hosted by the District of Columbia Building Industry Association (DCBIA) where he presented results from the CoStar study last month.

"The information we’ve discovered is very compelling. Like all good science, we discovered it by accident," Florance said. "Green buildings are clearly achieving higher rents and higher occupancy, they have lower operating costs, and they’re achieving higher sale prices."

Florance conducted the study with Jay Spivey, CoStar's director of analytics, and Dr. Norm Miller of the Burnham-Moores Center for Real Estate at the University of San Diego. The group analyzed more than 1,300 LEED and Energy Star buildings representing about 351 million square feet in CoStar’s commercial property database of roughly 44 billion square feet, and assessed those buildings against non-green properties with similar size, location, class, tenancy and year-built characteristics to generate the results.

"We wanted to take each and every one of these green buildings in our database and compare them to the buildings they directly compete with in the submarket," Florance said at the seminar.

One factor for the "green" premiums would appear to be the constricted supply of green buildings, which account for just a fraction of the total U.S. building stock (less than 1 percent of space in CoStar's database.) The study indicates that while the number of LEED-certified and Energy Star buildings continues to grow, the supply has not kept pace with demand.

CoStar began tagging green buildings in its database about two years ago with the help of the U.S. Green Building Council (USGBC), the nonprofit trade group that created the LEED certification system, and the U.S. Environmental Protection Agency (EPA), which administers the government-sanctioned Energy Star label.

Although often lumped together under the ‘green building’ moniker, LEED and Energy Star address distinct -- if not related -- goals.

LEED, which stands for Leadership in Energy and Environmental Design, indicates a property’s overall sustainability by awarding points for just about any sustainable feature imaginable, from bike racks and rainwater collection and reuse systems, to energy-efficient lighting and low-flow plumbing fixtures. It is comprised of specific programs tailored for new buildings, existing buildings and tenant build-outs, and awards different tiers of certification such as Silver, Gold or Platinum, the highest.

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